Gambling is a popular activity as reflected by the rapid increase in the number of casinos, as well as the increase in U.S. states that have casinos. These casinos deal with millions of dollars of transactions and generate equally substantial revenues. Casinos make their money by relying on the mathematical probability that a certain event or series of events will occur. For example, in the American version of the game of Roulette, there are 38 numbers that a player can bet on (1-36, 0, and 00). The correct mathematical odds of hitting one of these 38 numbers is 37-1. However, the casino will pay a winner only 35-1 odds, providing the casino (or the “house” as it is commonly referred to) with approximately a 5.26% advantage over the player.
This approach applies to other games, such as Craps, a popular and fast dice game. A bet on the “Pass” line pays 1-1 odds (even money); however, the true mathematical odds are slightly less than 50%, providing the house with approximately a 1.4% advantage over the player.
Casinos agree to pay players these fixed odds payouts, guaranteeing these payouts no matter how many players are playing these games and, more importantly, how many players are winning or losing at these games. This means that the casino is telling the player that a correct selection in Roulette will pay 35-1 odds, no matter what else is being bet on this Roulette table and irrespective of the performance of other players at the same table or other tables.
By making these guaranteed, fixed odds payouts, a casino is serving as the banker for the outcome of these games, thus the term “banked” games. The casino cannot predict the outcome of any one particular game, of course, but the actual results will statistically end up at their true mathematical odds over long periods of time, with thousands and thousands of transactions. The difference between these true mathematical odds and the actual results, with a built-in house advantage of a favorable fixed payout schedule, is how a casino derives a profit for these games.
A pari-mutuel betting system works a little differently. Invented in the 19th century in France, this betting system requires the separation of the amounts which are wagered by the participating players into: (1) a predetermined payment representing the gaming operator's profit, and (2) a player winnings pool, which represents the balance of the amounts wagered by the participating players after the gaming operator is paid. In a pari-mutuel system, players usually make wagers on a particular game of chance, event, or series of events. The two most common examples of pari-mutuel betting can be found at a table Poker game or at a thoroughbred horse race. In both cases, the gaming operator or house establishes a player wagering pool dedicated only to that particular game of chance, event, or series of events. The house then takes a slice of money off the top of the player pool, called a “takeout.” This takeout amount is, in essence, a commission to the gaming operator for sponsoring the event(s) or game. The typical commission percentage for table Poker is usually no more than 5% of the player pool for each hand or for each game. In a thoroughbred horse race, the typical takeout or commission is 10-15% of the total player pool dedicated to that race.
In a pari-mutuel betting format, players are competing with each other for winnings from a game of chance, event, or series of events and the gaming operator has no stake in the outcome of the game of chance or the event(s). As soon as the commission or takeout is removed from the player pool, the gaming operator is completely indifferent to the outcome of the game or event(s). Unlike the fixed odds payout system described earlier, the pari-mutuel pool is shared exclusively with the winning players and the house has no risk of a monetary loss due to the short-term volatility of the game or event(s). In reality, over long periods of time, these two betting systems provide very similar financial results, from the perspective of the gaming operator. But in the short-term, and in the actual mechanics of each betting system, the two are very different.
Casinos generally use the “banked” system referred to previously for their table games and slot machines. In this way, a player is competing for winnings against the gaming operator directly, using the fixed odds payout method described above. The game of Poker is a clear exception, as it can be played at a casino table in a pari-mutuel format. On a video machine, however, poker is played in a banked format as the player is only playing against the fixed odds of the banked system, and not against other players. Decisions by any player do not impact in any way the decisions of other players playing the same game.
Most table games and slot machines in a traditional casino operate on a pay-as-you go, cash basis (i.e., through the use of coins and currency), with players participating in games of chance and event(s) in a manner which is independent of the actions of other players. When a casino or gaming operator relies on this type of fixed odds payout system, it is difficult to organize games of chance and event(s) in a manner which allows the creation of pari-mutuel player winnings pools and the ability of players to compete against each other for winnings.
Computer technology has advanced to the point where it is now possible to create a “cashless” gaming environment, in which players can participate in games of chance and event(s) using pre-established wagering accounts located on a network consisting of central computers and linked player terminals. This computer network system is capable of creating player winnings pools, subtracting a takeout or commission for the gaming operator, and distributing the remaining balance of funds to winning players in a classic pari-mutuel format. Among other benefits, such a pari-mutuel gaming system and method could permit players to participate in a new and different gaming environment, while at the same time reducing the short-term volatility of the revenues and profits of a gaming operator, at least when compared to a traditional fixed odds payout system.
It therefore would be desirable to have a computer network which is capable of operating casino games in a pari-mutuel format.